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New York Gov. Andrew Cuomo unveiled his $168 billion 2018-2019 budget to lawmakers on Tuesday.

Cuomo's budget includes a three-percent increase in funding for schools and a one-percent increase in funding for higher education. The budget also increases funding for capital projects by 14 percent and health care by three-percent.

The budget also reduces spending on transportation, community colleges, mental hygiene and state agencies. State aid to municipalities and counties will be frozen.

The governor said his office is still working on a plan to combat the new federal tax reform bill that caps state and local tax deductions at $10,000.

Cuomo said at his State of the State that New York plans to challenge the bill in court, launch a tax fairness for all campaign, and possibly replace state income taxes with payroll taxes.